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Prepare the journal entry in amortized cost method

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Question: The management of NBI truly believes in taking care of its customers when possible. NBI offers its smaller customers to take advantage of its "Loan4U" program. Essentially, if a customer falls on tough times and needs a cash injection, NBI is happy to provide it in exchange for a bond. However, NBI management are quite selective and not every interested company will be approved for this opportunity. Management's goal is to find companies that are not too high risk but also would be willing to pay a high interest rate. Recently, NBI approved BaseBall Inc for the Loan4U program. On October 1, 2020, NBI 'purchased' $100,000, 3-year, 12% bond from BaseBall. The effective interest rate is 14%. Interest is payable semi-annually on April 1 and October 1.

Prepare the journal entry in amortized cost method.

Reference no: EM132753210

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